5 Tips To Avoid Foreclosure

If you are worried about keeping up with your house payments, you may be stressed, overwhelmed, depressed, or just plain tired. You’re not alone. But it’s important to act quickly to find solutions. Keep in mind you can’t save a home you’ve already lost.

Here are five essential steps for solving your mortgage crisis:
 

1. Don’t ignore the problem. 
   
   You don’t have to struggle with your mortgage problems alone. Remember that the sooner you act, the more options you’ll likely have.
   
   No matter how stressful it may be, answer phone calls and open mail from your lender. It’s also very helpful to start a file where you can keep copies of correspondence, as well as notes you’ll take each time you talk with your lender.
   
   TIP: Dig out the mortgage papers that you signed when you took out your loan. Keep those handy as you explore your options.
    
2. Prioritize your spending.
   
   No matter which approach you take to solving your mortgage problem, you’ll have to know how much money you have available to spend on your monthly payments. If you don’t do so already, start keeping track of your spending and your expenses. At a bare minimum, ask for receipts every time you buy something, and put those receipts in an envelope. Then take just a few minutes each day to write down everything you have spent, so you can create a basic budget.
   
   Decide which bills are most important, and make sure those get paid first. While everyone is different, most people put a high priority on:
   
   -    Mortgage payment
   -    Utilities
   -    Groceries
   -    Secured debts (such as an auto loan)
   -    Gas for the car
   -    Insurance premiums
   
   If you don’t have a good handle on your budget, take advantage of a free budget analysis through Union Plus Credit Counseling. Call 1-877-833-1745, available anytime or visit UnionPlus.org/CreditCounseling
    
3. Know your rights. 
   
   Your state’s foreclosure laws will address some of the questions you may have about foreclosure, including:
   
   -    How long will foreclosure take? In states that with judicial foreclosure proceedings, the lender must go to court before it can foreclose, and that process takes longer than states with statutory foreclosure proceedings, which are much faster.
   
   -    Can the lender come after me for the mortgage balance after foreclosure? In some states, lenders can sue you to collect any deficiency – the difference between what you owed, including foreclosure costs, and the fair market value of the home.
   
   Research the foreclosure laws in your state so you have an understanding of the process.  Foreclosurelaw.org or Foreclosures.com have general information. Because foreclosure is a serious matter, it’s a good idea to talk with an attorney as well. Union members are entitled to a free half hour consultation with an attorney and discounted attorney fees through the Union Plus Legal Service. 
    
4. Talk with a housing counselor. 
   
   A HUD-certified housing counselor will help you figure out what your options may be if your current home loan is unaffordable.   Call the Union Plus Save My Home Hotline at 1-866-490-5361 for additional assistance.
   
   These options may include:
   
   Refinance your loan: If you qualify, you can get a new loan to pay off your current loan. This may allow you to switch from a risky adjustable rate loan (ARM), into a fixed rate loan, for example, or it may allow you to refinance with a longer loan term and lower monthly payment. Here are three places to check with to find out whether you can refinance your current loan:
   
   a. Talk with your current lender.
   
   b. Call Union Plus Mortgage and Real Estate at 1-800-416-5786 to learn whether you qualify for a traditional refinance loan.
   
   c. Find out whether you are eligible for the government-sponsored Making Home Affordable Refinance Program.
   
   Modify your loan:  With a loan modification, your lender will temporarily or permanently adjust the terms of your loan. Your variable interest rate may be fixed for certain number of months, for example, or your interest rate may be lowered temporarily or permanently. Some lenders will modify loans directly with borrowers, others require you qualify under the federal Home Affordable Modification Program (HAMP).
   
   Click here to learn more about HAMP.
   
   Sell your home: Although selling your home can be a difficult decision, sometimes it is the best way to avoid a future financial disaster. If you think you may need to sell your home, act quickly.
   
   Ask a real estate professional to evaluate your home’s value. He or she can research “comps” and give you a list showing what properties similar to yours have sold for. You’ll also be able to find out how quickly homes in your area have been selling, and whether prices are going up or down. Be sure to price your home to sell, even if you think it should be worth more. Ultimately, your home is only worth the amount a buyer is willing to pay for it.
   
   Try a short sale: If you owe more on your mortgage than you can sell your home for, you may need to explore a short sale. With a short sale, the lender agrees to allow you to sell your home, even though the proceeds from the sale won’t pay off the balance you owe. Short sales can be complicated (especially if you have a second mortgage or home equity line of credit), so make sure you work with a real estate professional with experience in these transactions. Also make certain it is clear in your closing documents whether you will still be responsible for any loan balance left over after the home is sold.
   
   Deed in lieu of foreclosure: If you can’t find a buyer for your home, or if your lender won’t agree to a short sale, you may want to ask your lender whether it will accept a deed in lieu of foreclosure. In this case, you are essentially giving your home back to the lender. The advantage of this option over foreclosure is that it may save the lender (and perhaps ultimately you) foreclosure costs and hassles.
   
   Just as with a short sale, however, you need to make sure you have a clear written agreement that spells out whether you will be responsible for any loan balance left after you turn your home back to your lender.
   
   TIP: A short sale, deed in lieu of foreclosure, or forclosure will all have a similar, negative impact on your credit. You may need to focus on the best choice financially, though, and worry about rebuilding your credit later.
   
   Bankruptcy: While bankruptcy can’t typically wipe out or reduce the balance on your first mortgage, it may allow you to discharge (wipe out) other debts, which in turn may free up enough money so that you can pay your mortgage. (Though not common, sometimes a second mortgage or home equity line of credit can be reduced or discharged in bankruptcy.)
   
   Bankruptcy may also give you the opportunity to catch up on your mortgage payments over time, rather than trying to come up with a lump sum all at once to reinstate your loan. You can call the Union Plus Legal Service to find a lawyer in your area and get a free 30-minute consultation and additional time at a discounted fee.
    
5. Watch out for scams.
   
   The Federal Trade Commission warns that scams promising to help consumers save their homes are on the rise. Here are some ways to spot a potential scam:
   
   -    You are asked to pay an upfront fee. You should not pay a fee to anyone besides your lender or an attorney you hire to represent you. Remember, assistance from a HUD-approved housing counselor is free.
   
   -    You are asked to sign over the deed to your property to someone other than your lender.
   
   -    You are instructed to make your mortgage payments to a company other than your lender.
   
   -    You are pressured to sign papers immediately, or to sign blank pages or documents you don’t understand. Get an attorney to review any paperwork before you sign.
   
   Never sign a legal document without reading and understanding all the terms. Need help? Take advantage the Union Plus Legal Service to review paperwork.